Analysts from Bank of America (BofA) provided insight into the trends in the currency market, noting a significant rally in the pair last week. The increase was attributed to a subdued report from the US Consumer Price Index (CPI). BofA signals indicate that the euro’s upward trend against the US dollar is likely to continue.
The bank’s analysis pointed to option flows indicating continued demand for USD puts, suggesting investors are betting on a weaker dollar. Furthermore, BofA’s technical matrix revealed signals of a continued downtrend for the USD compared to major currencies such as the Euro (EUR), the British Pound (GBP) and the New Zealand Dollar (NZD).
Despite the positive trend for the EURUSD, BofA warned that the momentum in the risk rally may not be as strong going forward. The analysts noted that the (DXY), which measures the dollar’s strength against a basket of currencies, managed to close above its 200-day Simple Moving Average (SMA), indicating a possible slowdown in the decline of the dollar.
Additionally, BofA economists have found that there are no significant market-moving events in U.S. economic data this week. Without new bearish catalysts for the USD, the currency’s downward trend may not be able to maintain the same pace as last week.
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